Investing 101: Start Growing Your Cash Stash with These Simple Tips

Investing is intimidating, especially when you’ve never done it before. Check out these simple investment tips for nervous newbies ….

It’s common to hear people say they don’t have enough money to invest, but this is nonsense. If you make it a priority, you’ll have the money and time to invest and grow your money — and at a faster rate than a savings account will get you.

Regardless of whether you opt for pro help, though, now is a great time to introduce yourself to simple investment theory and terminology. Here are some investment tips and pointers, below.

Rule of 72

The so-called ‘rule of 72’ is a financial rule of thumb intended to let you double your money at a specific rate of interest.

Did your eyes gloss over? Let’s put it another way.

Say you have 10K you want to invest. If you want to know how long it will take for you to double your money at a two percent interest rate, just divide 72 by 2. The answer: 36 years. And with an eight percent interest rate, that ten grand money will double in nine years because, you guessed it, 72 divited by 8 equals 9.

The bottom line: The more time you have to grow your money, the less money you need.

So start investing early.

Rule of 115

Here’s another rule that is awfully handy.

Take the number 115 and divide it by your rate of return. This indicates how long it will take to triple your money.

Say you’ve got $5,000 and an eight percent rate of return. In 14.4 years, you’ll have three times the cash — $15K. And in 28.8 years, you will have turned your 5K into a tidy $45,000.

These rules aren’t just math exercises, you know. By helping you understand compounding interest, you gain a powerful tool for investing in your future.

Diversification and Trading

Any financial advisor worth her salt will tell you to invest in more than one type of company, fund or market. That’s because you’re mother was right: When you put all your eggs in one basket, you’re not safeguarding against risks in the market.

One of the best ways to manage risk is with diversification, which involves investment in various asset classes. These classes include: small-cap stock, large-cap stock, and emerging stock.

Diversifying your portfolio mitigates risk because if one asset class performs poorly, there’s always a chance another class has performed well.

This will balance out your losses, and because classes are interconnected, chances are if one has performed poorly, another will have performed well. This approach smooths out the volatile nature of investing, keeping you engaged for the long haul.

It’s also worth engaging in an RSI trading strategy, an 80/20 approach that uses an RSI indicator. It works with price action analysis to help you land great trade entries, and has proven effectiveness.

Mutual funds

This is an investment vessel formed from a pool of funds. These are collected from multiple investors who have stock, bonds, money instruments, and other assets.

In layman’s terms, if you invest in a mutual fund, that fund consequently invests in various bonds, stocks, or money market investments. This diversifies your money across many companies, reducing your risk considerably.

But whatever you do, don’t try to time the market.

Timing the market never works. If you frequently switch your investments to try and get in and out of the market at opportune times, you will hurt proceedings big time.

Moreover, there is plenty of evidence to suggest that, when investors try to time the market, it can increase and lower risk at the wrong times.